“…Any person who enters into contract for
service with a principal to supply employees required by the principal for the
execution of the whole or any part of any work for the principal in any
industry, establishment or undertakings other than the agriculture
undertakings, is exempted from sections 31, 33A, 69 and 73 of the Act...”

Abolish the ‘Contractor for Labour’ system

Withdraw the 2012 amendments to Employment Act 1955.

We, the undersigned 93 trade unions, civil society groups and organizations object to the actions of the
government of Malaysia in destroying direct employment relationship between the
principal, as employer, and their workers, as employees, with the latest
amendments to the Employment Act 1955.

The Malaysian Trade Union
Congress (MTUC) , which not only represents the about 800,000 unionized
workers but also the over 12 million workers in Malaysia, have strongly and consistently opposed the
proposed amendments since it was first tabled in Parliament vide Bill No:
D.R.25/2010 in July 2010, which the government later withdrew. The government
re-introduced the Bill with minor changes in June 2011 vide Bill No:
D.R.15/2011. MTUC came out even more strongly and also picketed at the
Parliament House on 3rd October 2011 and in spite of strong
resistance from many quarters, including on the Dewan Rakyat floor, the controversial Bill was passed
on6th October 201, did finally
come into effect on April 1st 2012.

We would like to address just
one of several aspects of the new amendments that is the main bone of
contention, i.e. the introduction of the new provision for the definition of
“contractor for labour”.

With
the amendment, the contractor for labour will be the third party (or the
middleman) who will come in between the now direct employment relationship
between the owner-operator of trade or business (defined as the “principal”)
and their worker-employee.

BACKGROUND

The
Employment Act 1955 was introduced before independence (Merdeka) by the British
Administration effectively abolishing indentured labour, bonded labour and the
“kanggani” system in Malaya. (collectively then known as the “contract system”).
The Act also did establish two very important principles of law which are
considered sacrosanct to this day. They are, security of tenure –
ensuring permanence of employment, and proprietary right to the job
– where termination of worker, shall be only with just cause and excuse and by
due process.

The
employment scenario in the country began to change in the early 1990s. In 1992
the government allowed migrant workers for the construction and plantation
sector. In 2000, it was extended to manufacturing and service (hotel and
restaurants) sectors and in 2002, it was extended to all sectors.

Originally
migrant workers were employed directly by the principal employer but this started
to change in 2005, when the Cabinet Committee on Foreign Workers in its meeting
on 5-July 2005 agreed to the recruitment of foreign workers through outsourcing
companies (now known as ‘Contractor for Labour’ in the amended Act). The issuance of these outsourcing licenses
was strangely done by the Ministry of Home Affairs, not the Ministry of Human Resources. There are today about 277
registered labour outsourcing companies in the country today. (The Star,
23-Feb 2010).

This
establishment of the outsourcing companies allowed for the re-emergence of the old
‘contract system’. It opened doors resulting in a direct assault on
the basic foundation of labour rights, the undermining dignity of labour, perpetuating
the establishment and operation of dehumanized and bonded labour. The practice,
which started with migrant workers, was then extended to local workers.

These
outsourcing companies recruited local workers and migrant workers, some on fix
term contracts, with terms and conditions usually less favourable than that of workers
directly employed by principals.

The incidence of principals
using workers supplied by outsourcing companies is growing. The principal company pays the outsource
company an agreed sum of money for the number of workers supplied, whether they
be local or migrant workers. The principal company effectively is able to avoid
the employer’s duty and obligation to ensure their workers’ rights and welfare
are protected. This practice also saved principal company money that would have
ordinarily been expended for workers like medical cost, insurance, bonus, wage
increments, retirement benefits, transportation and accommodation, service
awards, and several other benefits. It also allows them to evade statutory
contributions to the Employees Provident Fund and for social security schemes.
The principal company also evades all obligations and safeguards in law when
workers are hired or terminated, including domestic inquiries and lay-off and
termination benefits. If the principal wants to now get rid of workers, it now merely
have to inform the outsource company.

To convert the workforce
from permanent employees to short-term
contract employees, and now outsourced workers, most principals either retrenched
their workers, used “voluntary separation schemes” or other methods, or simply
terminated their employees substituting them now with workers supplied by the outsourcing companies.

REASON FOR THE AMENDMENT

These
outsourcing companies have been allowed to operate outside the law with no law
regulating them. Even though they were manpower/labour suppliers, they were not
created under and/or regulated by the Private Employment Agencies Act 1981,
which would have also ensured these manpower/labour suppliers would only provide workers and not become
employers of workers supplied.

The
recent amendment to the Employment Act is to give these outsourcing companies
statutory recognition under the Employment Act, and at the same time institutionalize
and legitimize employment through the outsourcing companies, which now legally will be legally known as the “contractor
for labour”.

A
primary reason for the creation of the ‘contractor for labour’ and the
introduction of labour outsourcing is to stifle workers and trade unions
capacity to demand and negotiate for better rights and benefits. The MTUC
Memorandum to the HR Minister dated October 7, 2008 refers to an interview with Datuk Ishak Mohamed, the Enforcement Director of the Immigration
Department that was published in New Straits Time, July 20, 2008, where he, amongst others,
said, ‘…outsourcing is good as it will attract foreign direct
investment. Investors
do not want unions to be formed in their establishments. Through outsourcing,
it would be difficult for unions to be formed as outsourcing company, and not
the factory, would be the employer…’
is indicative of the intention of the government.

SUB-CLASS
OF WORKERS.

The creation of this new sub-class of workers, who
are not considered employees of the principal, also jeopardizes existing employment
relationship between the principal and their current worker-employees, likewise
the relationship with their trade unions. Today, these new sub-class of
workers, made up of both local and migrant workers, are found in most
workplaces, including even government-linked companies, whereby in some
factories they currently make up about 50% of the total workforce. Trade unions are
being weakened, and their bargaining powers for better rights and benefits for
workers are slowly eroding by the increasing presence of workers who are not
employees of the principal, and also by the loss of security of tenure created
by short-term contracts.

‘Contractor for labour’ is
actually outsourcing of labour
which is very different from outsourcing
of work. Outsourcing of work is when principal employer outsources some
specified work or operations which are not their core operation, to another
company who carries out the work for the principal using their own employees
under their own control and supervision. For example, in several manufacturing companies,
cleaning, turf/gardening, canteen and security services are examples of
outsourced work. This outsourcing of work is legal, and the workers of those
who are doing outsourced work are protected by the Employment Act.

Contrary to the principle that workers doing core
operation work should be employees of the principal, this amendment to the Act now
allows the ‘contractor for labour’ to supply workers to perform the
core operation under the control and supervision of the principal’s supervisory
staff and managers. The ‘contractor for labour’ merely collects the salary of
the labour supplied and apportions a part to himself and pays his workers, usually less than the
workers who are under the direct employment of the principal, though they do
the same work. The principle of equal pay for equal work is thus breached.

The principal, who is
considered not the employer of the workers supplied, absolves himself of all
liabilities and employer’s obligations with regard these workers supplied by
‘contractor for labour’ who are working for the principal’s benefit,

“…Any person who enters into contract for
service with a principal to supply employees required by the principal for the
execution of the whole or any part of any work for the principal in any
industry, establishment or undertakings other than the agriculture
undertakings, is exempted from sections 31, 33A, 69 and 73 of the Act...”

However, the words used in the said exemption order,
which by the way also did not include the amendment in section 2, which was the
very amendment that gave statutory recognition to the ‘contractor for labour’
and its practices, only further affirms the contractor for labour and their
practices. The exempted sections referred to in the said Order merely dealt
with ancillary matters like registration of employees when supplied to
principal and priority of debt. The exemption order also would deny access to
justice for workers now being supplied by these ‘contractor for labour’ in all
the exempted sectors.

MTUC and all groups that opposed the amendments were
not appeased by this exemption order, and continue their objections to the
‘contractor for labour’.

PROTEST

We strongly object to the ‘contractor of labour’
system. All workers that work under the control and supervision of
the principal must be the employees of the said principal not some third party. The
Malaysian government’s action is in breach of article 8 of the
Federal Constitution. In 1998, Malaysia also ratified the ILO Declarations on
Fundamental Principles and Rights at Work but this amendment is incontravention of the said Declaration. Further,
it also is in contravention of the ILO’s Decent Work Agenda which Malaysia has committed to.

The International Trade Union Confederation (ITUC), many
trade unions and civil society groups, also opposed, and still oppose this
amendment. The Malaysian Bar also recently passed unanimously a resolution on
March 10th 2012, amongst others, calling for the maintenance of existing 2-party employment
relationships, and also that labour suppliers and/or contractors of labour
should never be or continue to be employers of workers after they are supplied,
accepted and start working at the workplaces of principals.

The contractor for labour and their practices should
not be allowed in any sectors including the plantation and agricultural sector.

DEMAND

We, therefore, demand for the repeal of all
amendments to the Employment Act 1955, in
particular the amendments to section 2, 31, 33A, 69, 73 brought about by
Employment (Amendment) Act 2012 [ACT A1419] relating to the ‘contractor for
labour’ and their practices, and pending
repeal for an immediate stopping operation of the said amendments.

We call for the abolition of the contractor for
labour and their practices and that all workers, currently supplied by these 3rd
party manpower/labour suppliers (contractor for labour) who are still not
direct employees of the principal employer be immediately made employees of the
said principal and be accorded same benefits and treatment as accorded to all
other employees without discrimination, including the right to form/join trade
unions or afford protection and entitlement to the benefits accorded through
their respective Collective Agreements.

We call for the abolition of precarious employment,
and for retention of a just 2-party employment relationship between principals
and workers, and for the respect of worker and trade union rights.

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